Denial Codes in Medical Billing: A Comprehensive Guide

DENIAL CODES IN MEDICAL BILLING: A COMPREHENSIVE GUIDE

Denial codes are crucial for understanding why claims are turned down and provide valuable insights into what was wrong with them. Knowledge of these denial codes is essential for efficient revenue cycle management (RCM) and ensuring proper payment for patient services.

This article discusses different denial codes, common reasons behind such occurrences, and prevention measures. It does not matter whether you are an interested party, a billing specialist, or a healthcare professional intending to learn details about claim denials; this comprehensive guide will equip you with the necessary knowledge regarding denial codes.

DENIAL CODES IN MEDICAL BILLING: PURPOSE and SCOPE

Denial Codes used by insurance companies help them establish why healthcare claims have been totally or partially declined. Denial codes give specific explanations for claim rejections, allowing billers and healthcare providers to know what caused the denial, thus enabling them to take necessary actions that can lead to issue resolution. Claim rejection has become more transparent and evident thanks to denial codes that benefit patients. Denial codes, commonly found in electronic remittance advice (ERA), provide healthcare providers with detailed information regarding payer-submitted claims payment, denial, or adjustments.

CLAIM ADJUSTMENT GROUP CODE (CAGR)

Electronic Remittance Advice (ERA) transactions use Claim Adjustment Group Codes (CAGCs) as standardized denial codes t to identify the type of correction made on a health care claim. Two alpha characters are used in group code claims when paying the unpaid part of the balance on a claim while submitting it to the health plan provider, together with claim adjustment reason codes.

The following are the claim adjustment group codes:

1. CONTRACTUAL OBLIGATION(CO):

This code explains the difference between what a provider charges and what the payer will pay. This is mainly written off by healthcare organizations when dealing with such claims’ balances.

2. CORRECTIONS AND REVERSAL (CR):

Health plan companies use this code to signify that a previously denied claim has been corrected or reversed. CR codes are also used with PR, CO, or OA to indicate the material.

3. OTHER ADJUSTMENT (OA):

When none of the group codes satisfy the adjustment criteria, many health plan firms use this one.

4. PAYER-INITIATED REDUCTIONS (PI):

This code may be applied if a payer determines that adjustments are not the patient’s responsibility.

5. PATIENT RESPONSIBILITY (PR):

PR assigns responsibility to patients or their secondary insurance companies for payment purposes. PR amounts include all deductibles, copayments, and coinsurance.

CLAIM ADJUSTMENT REASON CODEs (CARC)

Claim Adjustment Reason Codes (CARCs) are standard denial codes in ERA transactions that explain financial adjustments.

REMITTANCE ADVICE REMARK CODE (RARC)

Remittance advice remark codes (RARCs) provide additional information related to Claim Adjustment Reason Codes (CARCs), helping to clarify adjustments. There are two main types of RARCs:

1. Supplemental RARCs: These offer more detailed explanations about CARCs, helping to further specify the reason for an adjustment.
2. Informational RARCs: Also known as alerts, these provide general information about the remittance process.

Payers are required to use CARCs and RARCs recognized by code set maintainers under HIPAA, ensuring consistency and clarity in communication. Additionally, the CARC and RARC Committees allow stakeholders to propose new codes or amendments, which are reviewed periodically throughout the year.

REASONS FOR DENIAL CODES

These are the following reasons why denial codes are used. A denial code usually accompanies the denial of claims for failing to fulfil specific requirements the insurance company sets.

1. MISSING INFORMATION

Incomplete can cause a claim to be denied. This may include social security numbers, modifiers, addresses, etc.

2. LACK OF AUTHORIZATION

Healthcare organizations must follow a prior authorization process to ensure payers cover specific services. Failure to obtain this authorization often leads to claim denials.

3. PATIENT ELIGIBILITY

This means verifying that the patient is covered as their insurance plan outlines.

4. MEDICAL NECESSITY

Insurance companies have their criteria that they use to determine whether a medical procedure is needed or not.

5. DUPLICATE CLAIM OR SERVICE

Another claim will be discovered and rejected if it contains similar information.

6. LIMIT FOR FILING EXPIRED

A failure by insurance companies to file claims before deadlines results in denials of those claims.

7. NOT A SERVICE COVERED BY PAYOR

An instance where the medical biller did not verify with a patient’s insurance company if the treatments and services were covered.

MEDICAL BILLING DENIAL CODES

Statistics indicate that one out of seven claims are denied, and over two hundred million rejections happen daily. It costs about $25 on average for a denial rework. By doing so many denials, providers give up on significant revenue by merely reworking denied claims. Providers could save a lot on claim rework if they understand denial codes. The most common codes include:

1. CO-4—OMISSION OF A REQUIRED MODIFIER

Denial code CO-4 is sent to insurance companies when there’s no required modifier or if the procedure code disagrees with the one used. A modifier refers to a two-digit numeric or alphanumeric code applied with CPT codes to indicate that the service has been modified without altering its definition or code. What next?

If you receive denial code CO-4, you should:

•  Ensure whether your coding team has wrongly utilized a modifier or forgotten about it entirely.

•  Make sure you fix the mistake and resubmit your claim.

In cases where your team does not use correct modifiers, consider the following options:

•  If you have put the proper modifier, and for some reason, it is declined, contact their claims department for reprocessing.

•  Alternatively, disagree with the payer and submit the necessary documents to him to substantiate your case.

2. CO-11 – AN ERROR IN CODING

Denial code CO-11 is issued when a claim contains an incorrect or mismatched diagnosis code. Diagnosis codes are critical because they describe the patient’s condition and justify the medical services. If the code does not accurately reflect the diagnosis or align with the services billed, the claim will be denied under CO-11.

What should I do next?

If you get denial code CO-11, you need to:

•  Look out for any incorrect diagnosis codes causing the rejection.

•  Use this information to correct the claim and resubmit. However, you can appeal against the claim if there is no mistake.

•  When challenging the claim, always provide any records that support the medical necessity of the procedure for the diagnosis.

3. CO-15 – MISSING OR INVALID AUTHORIZATION NUMBER

Denial code CO-15 is used if you give the insurance company the wrong authorization number for a service or procedure. Prior approval from the health insurance provider is needed to get coverage for specific patient services or treatments. Once approved, block number 23 on the CMS-1500 form should be filled with the prior authorization number. When this is not done correctly, it often causes denial of claim.

What next?

When your claim gets denied by an insurer through their denial code CO-15:

• Check with your billing team whether you made prior requests for approvals.

• Inspect field 23 on the insurance forms to see if any mistakes have been made.

• Keep the claim suspended while trying to obtain retroactive authorization if pre-authorization information isn’t available.

4. CO-16 – INCOMPLETE INFORMATION

Healthcare insurance providers employ the code CO-16 to reject claims with missing data. One of the major causes of these denials is incorrect or absent modifiers. Technical and demographic errors, inappropriate modifiers, no Social Security Number (SSN), and invalid CLIA (Clinical Laboratory Improvement Amendments) numbers are some examples of rejections with CO-16.

What next?

To fix denial code CO-16 claim denials:

•  Check accompanying remark codes and make changes accordingly.

•  Go over clinical notes again and see what’s missing.

•  Get your claims cleared by a clearing house before submitting them.

 

5. CO-18 – DOUBLE BILLING

Insurers use denial code CO-18 to reject duplicate claims. This occurs when the same service is billed more than once, adjustments are not indicated on resubmitted claims, or the same service is performed multiple times a day without the appropriate modifiers.

Additionally, claims sent to primary and secondary payers can be rejected if the primary payer has already forwarded the claim to the secondary. Always verify through your electronic remittance advice to ensure the primary insurer has not already submitted the claim to the secondary payer.

What’s next?

Take the following steps to remove the objections:

•  To find out about duplicate policies, contact the insurance company.

•  Find out if claims are being processed or not.

•  If you are sure that you only submitted it once, request the health plan provider to reprocess it.

•  If no good reason is given for denying coverage by the health plan provider, file an appeal.

6. CO-22 – COORDINATION OF BENEFITS

Coordination of benefits (COB) determines whom to consider as a patient’s primary, secondary, and tertiary payers if more than one payer covers them. Tertiary insurers use this denial code CO-22 to reject claims billed for services provided by secondary providers.

How to proceed?

You can proceed by:

•  Check the primary insurance providers’ list for insurance eligibility.

•  Update clients’ benefit coordination information.

•  Determine where to send the claim.

7. CO-27 – EXPENSES INCURRED AFTER THE PATIENT’SPATIENT’S INSURANCE EXPIRED

Denial code CO-27 indicates that insurers will reject claims for services provided after a patient’s insurance coverage has expired. To avoid such denials, verify your insurance eligibility before setting up appointments.

What to do next?

If you get a denial code CO-27:

•  Confirm the duration of coverage or contact the claims department as per the notice from your insurer.

•  Ask patients if they have any other health insurance.

•  If still in force, return the claim for processing because even insurers sometimes make errors.

•  They must be billed if there is no active policyholder.

8. CO-29 – LIMIT FOR FILING EXPIRED

Using denial code CO-29, any claims submitted after the due date shall be denied. A few examples of deadlines for filing claims are:

Aetna: It allows hospitals to submit claims for one year after service. Doctors should submit claim forms within 90 days of the date of service.

Cigna: Participating healthcare providers must submit their claims within ninety days from the day they provided the medical services, while out-of-network providers have 180 days to do the same.

TRICARE: You are given one year to file your claims after receiving hospital care.

United Healthcare: You can request benefit payment for ninety days following discharge or service date.

What to do next?

What is next to resolve denial code CO-29?

•  Check when you handed in your initial claim to your health plan and make sure they accepted it.

•  See whether it was filed promptly while calculating.

•  If you can prove it was sent on time, file an appeal.

9. CO-45- EXCESSIVE FEES

This denial code is used when an amount charged for a service exceeds the maximum allowable fee. Also, no provider adjustment can duplicate that made by the prior payer in this adjustment. This rejection code may also be part of the “PR” (patient responsibility) group code, depending on the liability since it usually means copays and deductibles.

What to do next?

When resubmitting with denial code CO-45, a replacement claim:

•  All appropriate HCPCS codes must be reported for services rendered.

•  Include any supporting document to justify the claim and ensure proper processing.

10. CO-97 -ALREADY ADJUDICATED

Bundled services are several procedures that are performed together as one treatment. Multiple claims billed for bundled services result in health plan denials using denial code CO-97. Evaluation and management (E&M) services fall into this category because insurers do not pay you separately for each service provided; they spend a global amount for all services offered simultaneously.

What to do next?

•  For addressing denial code CO-97, you should:

•  Determine if the procedure code is inclusive, exclusive, or bundled.

•  Once you have established the nature of the procedure code, get in touch with the coding division and find out if a modifier can be added before resubmitting the claim.

• How to file for appeal should be checked by the claims department.

11. CO-167 – DIAGNOSES NOT COVERED

Payors don’t cover all procedures. Claims for services not covered under the insurer’s policy are denied using denial code CO-167.

What to do next?

The following actions should be taken to address denial code CO-167:

•  Use ICD-11 denial codes for error identification.

•  Find out from your insurance company which diagnoses are not covered.

•  If necessary, resubmit the claim as a corrected claim.

STEPS To Take AFTER A CLAIM DENIAL

After examining the common causes of claim denials and various denial codes, it is essential to address the steps that can be taken following a denial.

When submitting an appeal for a claim to be reconsidered by the insurer, proper documentation is crucial to support the internal appeal. This appeal must be filed within 180 days of receiving the denial notice. Once the internal appeal is completed and submitted, the insurer must provide a written response after a thorough review. However, it is advisable to exhaust the internal appeal process first to prompt the payer to reconsider their decision. Once an external review is conducted, insurers must abide by the outcome and no longer have authority over the claim payment decision.

External Review Process

Write a letter within four months from the day when you received a claim denial notification.  The external review would support the insurer’s decision or rule in your favor. Regardless of the outcome, the insurer must comply with the decision made by the external reviewer, as it is binding and final.

HOW TO AVOID CLAIM DENIALS IN MEDICAL BILLING

If you adhere to these strategies, then denial of claims will cease completely:

TRAIN STAFF

Adequate staff training is essential to prevent claim denials. If team members are not current with the latest claim filing rules, they risk processing claims incorrectly, leading to denials, revenue loss, and financial strain for patients. Therefore, ensuring that all staff are well-trained and fully informed about coverage policies and payment requirements is crucial.

INSURANCE VERIFICATION

Claims submitted to incorrect payers will be denied. To reduce denials, verify benefits eligibility before appointments to confirm coverage and establish financial responsibility upfront.

EXPLOIT TECHNOLOGY

Errors can be made when using physical methods. And there is no margin for error in claim submissions. One tiny typo will cause your claim to be denied. Care Cloud medical billing software helps avoid unnecessary mistakes and assists you in storing and maintaining patient insurance details. Clearinghouse integration also enables the review of claims for coding and format mistakes before they are sent to payers.

ENHANCE DOCUMENTATION

These shorthand notes may get lost as they get passed from one department to another, thus making mistakes. This is why it is better to use electronic health records to record patient clinical, insurance, and demographic information accurately. In addition, Care Cloud has a full-fledged EHR that gives a complete view of all patient data.

ELIGIBILITY

Organizations in the health sector are supposed to have eligibility systems. Nonetheless, eligibility is concerned with determining whether or not the medical services given to a patient fall within the limits of their insurance plan. An insurer does not cover every surgery for all patients. For this reason, due diligence calls for real-time eligibility implementation that will result in minimal denial rates in your business.

STAY UPDATED

Insurance companies change their policies often. Consequently, you must be aware of changing demands from insurers, such as prior authorizations, referrals, and medical necessity to reduce denial rates.

RUN AUDITS

Rather than repeating old mistakes, it would be better if they could prevent denials altogether. Create denial reports to find out related patterns and fix them instead.

CONCLUSION

Managing claim rejections is challenging, as even minor errors can lead to denials, impacting revenue and patient satisfaction. This discussion explored the importance of accurate coding, prior authorization, proper documentation, and adhering to payer-specific guidelines. Practical staff training is also crucial in reducing errors. Care Cloud’s Medical Billing Software offers a solution to streamline the process by ensuring claims are accurate and compliant before submission. This advanced system minimizes errors, leading to higher reimbursement rates and fewer rejections, ultimately supporting healthcare providers in optimizing their revenue cycle and maintaining financial stability.